The Cantilan Bank Microfinance & Micro-Agri Experience A Presentation For The BSP Study Group July 23, 2010 Butuan City vers.Fin 08/21/12

 1980: Year Bank started  12 : # of Branches  20 Kiosks  P840.6M: Resources (6/10)  P667M: Loan Portfolio  P71.6M: MF Portfolio  (11% of total portfolio);  P550M: Deposits  (82% of loan portfolio); 249: # of employees vers.Fin 08/21/12

MF Share to Bankwide June 2010 MF Others vers.Fin 08/21/12

Cantilan Bank started transitioning from “traditional” to market driven banking in 1999 Changes & Innovation To Take the Bank to The Next Level:  Formulated Bank Vision and Mission ;Vision and Mission  Staff training and professionalization  Strategic and operations planning  Systems improvement – MIS/Banking software  Geographic expansion - from 3 to 12 branches & 20 OBOs. vers.Fin 08/21/12

 Change in leadership (1999);  Partnership with the USAID-supported RBAP-MABS Program starting in 1999;  Regulations favorably affecting Bank’s growth, outreach and efficiency ◦ Lifting of interest rates ceilings ◦ GOP policy support for microfinance ◦ Branching policy  Establishment of OBOs  Availability of external credit facilities;  Technology; ◦ Mobile phone banking / ATM  Competition which made bank  try harder, improve efficiency vers.Fin 08/21/12

Deposit Products Loan Products  Regular Savings Deposit;  Time Deposit;  Student Savers Club (for pupils & students) Secured Loans; – Agricultural – Commercial – Industrial Back to Back Loan; Salary Loans; Pension Loans; Microfinance Loans – KITA Loan – Individual Loan; – MAKITA Loan – Group Lending; – PAG UMA Loan – Micro- agri; – HOME Loan – HMF; – Pang-Eskwela Loan – Educational Loan; – Commodity Loan – For acquisition of cell phones and other home assets Other Services On line/ Fund Transfers/ inter-branch deposits; Mobile Phone Banking; Money Remittance; Payroll servicing; Accepts SSS remittances; Demand Draft. vers.Fin 08/21/12

To offer a product suited to the farmers’ financial needs; To help farmers reduce their dependence on high cost informal loans; To provide farming households access to suitable deposit products. vers.Fin 08/21/12

Small farmers involved in various agricultural activities (vegetable, backyard poultry, cattle, etc.); VEGETABLE POULTRY MARINE PRODUCTS vers.Fin 08/21/12

Loans can be used to finance:  Farm working capital;  Purchase of farm animal;  Small farm tools and implements. FARM ANIMAL SMALL FARM TOOLS and EQUIPMENT RICE vers.Fin 08/21/12

 Small farmers with multiple sources of income;  Well defined policies and procedures patterned after the MABS MF lending approach;  Based on character- and cash flow rather than production cost per unit. PAG-UMA vers.Fin 08/21/12

 Amount: P3K to P150K;  Term: months  Payment: Weekly, Bi-monthly, Monthly  Interest rate: 3% per month  Service Charge: Flat amount per loan  Amortization: Straight regular; or 60/40 option ( regular payment With balloon not more than 40%) vers.Fin 08/21/12

 Guarantees: Household assets/Co- makers;  Other condition: Contractual savings  Repeat Loan Increase: Based on cash flow, repayment record; but not more than 30% of previous loan PAG-UMA vers.Fin 08/21/12

Orientation and Application CI/BI Cash flow Analysis Loan Application Review & Approval Loan Disbursement Collection & Monitoring vers.Fin 08/21/12

November 2004 in Tandag branch with one AO After 6 months –45 accounts –Portfolio 228K –Zero PAR vers.Fin 08/21/12

San Miguel Nov 2005 Cantilan Nov 2005 Tubod May 2007 Surigao City Aug 2007 Butuan Dec 2007 Tandag June 2004 Pilot Branch Madrid June 2007 vers.Fin 08/21/12

3,961 Cum. # of new borrowers 7,900 Total # of loans disbursed PhP 81.0 M Cum. Amount Disbursed Pag-uma Outreach vers.Fin 08/21/12

 Overall PAR below double digit ◦ PAR30 = 7%  Internal and external causes contributed to delinquency ◦ Initial birth pains ◦ Force majeure  Small agri producers NEED: Suitable, effective, efficient agri insurance product against typhoons, floods, pests & diseases Portfolio Quality vers.Fin 08/21/12

Deposit to Loan: 36% vers.Fin 08/21/12

Challenges What have been done  Staff perception that Pag-uma is just the same as existing micro loan product; very slow growth in initial years  Paying loans regularly was something new to farmers used to lump sum payments  Identified areas with high concentration of agri activities & existing clients with farming activities;  Set realistic targets per branch and AO  Involvement of top management in pushing and monitoring;  Improved communication and information on the benefits of regular payments; provided 60/40 payment option vers.Fin 08/21/12

 Challenges ◦ Lack of more responsive agri insurance coverage ◦ Inability to reach farmers at a faster pace  Future Plans ◦ Product enhancements; ◦ Incentives to clients ◦ Insurance ◦ Geographic expansion PAG-UMA vers.Fin 08/21/12

 Money remittance;  Mobile Phone Banking;  ATM –partnership with ENCASH, and, very reently, DBP  Championed Consumer Protection and Transparency vers.Fin 08/21/12

Challenges What have been done  Entry of MFIs not supervised by BSP – creates credit pollution, multiple borrowing, and over indebtedness  Improved our service delivery system;  Provided fair and transparent pricing;  Enhanced existing Product and developed new ones;  Continuous client education;  Adherence to best practices learned from MABS Approach  BUT MOST OF ALL, WE WAIT – for the implementation of the National Credit Information System vers.Fin 08/21/12

Challenges What have been done  Inability to service small depositors in OBOs’ service areas;  OBOs in areas more distant from the branch makes depositing and withdrawing deposits costly for MF clients.  Given present regulation, no option except to adhere to current BSP regulations or face stiff penalties. vers.Fin 08/21/12

Name: Marial Lovella Lim Business: Ampaw & Chicharon Processing; rice farm Brief History: 2007: got 1 st loan Loan purpose: Working capital for rice production Started with “Ampaw” and now “Chicharon”, pop corn, banana chips; products use locally available raw materials and farm by products Cycle Information: 1 st Loan: 20K Current (7 th ): 35K vers.Fin 08/21/12

Name: Mary Ruby Malazarte Business: Hog & Poultry Raising Started with just 10 Sows Now: 189 heads ready for selling, 62 Sows, 42 piglets Loan Information: 1 st Loan of P50K Current (3 rd ): 150K vers.Fin 08/21/12